NEM Launches, Targets Old Economy with Proof-of-Importance

After a year in the making, the cryptocurrency NEM (New Economy Movement) has officially been launched. CoinTelegraph had the chance to site down and discuss the ambitious project with one of the lead developers, Makoto, to find out more.

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After a year in the making, the cryptocurrency NEM (New Economy Movement) has officially been launched. CoinTelegraph had the chance to site down and discuss the ambitious project with one of the lead developers, Makoto, to find out more.

“NEM was started to rectify some of the problems with not only the world economy, but also with other cryptocurrencies. One of the problems is of course distribution of wealth.”

- Makoto, Lead developer, NEM

CoinTelegraph: Please introduce yourself to our readers.

Makoto: I am Makoto, one of the lead devs on NEM. I am a PhD student in computer science and my areas of expertise are cognitive science and artificial intelligence, fields where I have published many papers. NEM's consensus algorithm, Proof-of-Importance (POI) was proposed based on work I am doing for my PhD.

CT: How long have you been working on this project?

M: I joined NEM last February. They were looking for devs who knew Java and I just happened to find the project at the right time. Other devs joined the team in January or so, so NEM development has been ongoing for about 14 months at this point.

CT: Who is the NEM team and what is it like working with them?

M: Working with the NEM team has been a wonderful experience. First, the main devs are incredible. Out of 5 core developers, several have PhDs and others have high profile jobs as coders at companies that would be instantly recognizable. Gimre, BloodyRookie, and Jaguar are amazing programmers and some of the smartest people I have ever met. I learn new things from them everyday and it is truly an honor to be a part of this team.

Besides the 5 main developers that are just writing code for the core of NEM, we have about another 10 periphery developers supporting us, and 20 translators making sure that NEM can reach out to as many people in as many countries as possible. And then we have a marketing team with 7 dedicated workers giving it their all. So our main team has over 40 people, but on top of that we have another 40 community members with unofficial roles that are very active and contribute regularly.

And then there are the people who regularly join in on our forum and other outlets. We have almost 800 forum members and almost 2,000 likes on Facebook. We are still a pretty small community at this point, but we are hoping that our launch will really help to kick start the community and make it more active, as well bring in more marketers and core developers.

CT: Why did you start making another cryptocurrency? Do you see any problems in bitcoin?

M: NEM was started to rectify some of the problems with not only the world economy, but also with other cryptocurrencies. One of the problems is of course distribution of wealth. In fiat-based economies, the richest 1% will soon own more wealth than the other 99% of people. In crypto currencies like Bitcoin, wealth is concentrated to such an extent so as to be an existential threat, and other crypto currencies have been similarly criticized.

“If one person can dump and destroy an entire currency, then that reduces the opportunity of others.”

Some level of inequality is not necessarily a bad thing, and indeed people have significant individual differences, but it can be a bad thing when it hampers equality of opportunity. If one person can dump and destroy an entire currency, then that reduces the opportunity of others.

With NEM, we really want to bring the focus of money back to the people. The world today is one where money is controlled by powerful elites, banks, and governments; at NEM we want to empower regular people and that is why our motto is, "A new economy starts with you."

CT: Tell us what NEM is and what problem it solves?

M: NEM is about empowering individuals. By solving structural problems present in today's economic system, we want to enable people to do more with their lives. Money can be considered as a quantization of human life, as we all commit our time, which is finite and irrevocable, to the pursuit of money.

Thus economic power is power over life itself and those who deny an equal economic opportunity to others, especially through the centralization of power or borrowing wealth from future generations, are causing tremendous harm to our planet and are the cause of much human suffering.

The NEM platform gives people direct control over the transfer of value (sending XEM) and information (sending encrypted messages) to others. Multisignature accounts allow people to collaborate to send money to others safely. In future releases, features like colored coins will allow people to transfer arbitrary digital properties to each other. Together, these features form a comprehensive platform that gives people power over their own finances, without having to rely on centralized authorities. It also helps people to be more efficient.

CT: Proof-of-importance. What is it and what's the advantage over proof-of-work or proof-of-stake?

M: Transactions in NEM are organized into blocks that form a distributed ledger known as a blockchain. As there is no central authority in NEM, the creator of the next block must be agreed upon using a consensus algorithm, such that everyone knows that the block creator has the authority to do so.

In NEM, Proof-of-Importance is the name of the algorithm that handles the consensus, where "importance" refers to graph-theoretic importance in the transaction graph. The NEM economy is built from transactions, so for our purposes here, the importance of an account in the transaction graph is a good approximation of the importance of the account in the economy.

Bitcoin's Proof-of-Work is probably the most famous probabilistic Byzantine consensus (Nakamoto consensus) algorithm, where computers compete to find the solution to a computational problem. Bitcoin has shown this to be a reasonable solution to Byzantine consensus, but unfortunately it comes with a very high energy cost, as computational power and electricity are expended to do worthless computation. It also ensures that the rich get richer, as those who have money can afford more hardware to solve the computational problems.

“Proof-of-Importance improves upon Proof-of-Work and Proof-of-Stake by rewarding accounts that actively participate in the economy. The balance of an account, who transacts with them, and how much they transact to others are all combined to calculate an account's importance.”

Proof-of-Stake, especially as implemented in NXT, was a huge advancement over Proof-of-Work, because it showed that you do not need to expend large amounts of finite resources like electricity to achieve probabilistic Byzantine consensus. Instead, you could just use the stake, or balance, of an account to generate a probability distribution that could then be sampled from to determine who would create blocks in the blockchain.

The account balances and information are known to all, so it can be proved that the creator of a block had the authority to do so. Unfortunately, this leads to the situation where the rich get richer, as block creators collect transaction fees. Also, just because someone is rich (has a high balance), it doesn't mean that they productively contribute to the overall economy.

Proof-of-Importance improves upon Proof-of-Work and Proof-of-Stake by rewarding accounts that actively participate in the economy. The balance of an account, who transacts with them, and how much they transact to others are all combined to calculate an account's importance. This effectively rewards accounts that help to support the NEM economy, while a temporal vesting schedule of XEM used in the calculation makes account importance approximately invariant upon account splitting, making Sybil-style attacks impractical.

CT: Why is NEM always compared to NXT. Is it based on NXT? How are the two projects related?

M: Very briefly in the beginning, we were considering basing NEM off NXT's code base, but in actuality this option was not seriously considered and we decided early on to create a new code base from scratch. A lot of people who joined NEM also are active in the NXT community, which is probably why NXT and NEM are often thought to be related.

“When a person really takes a look at NEM and NXT, they can see that they are both written in Java, but after that the differences start to really stand out.”

There are many differences between NEM and NXT, such as our anti-spam protection, Eigentrust++ to make sure nodes are trustworthy, delegated harvesting for safely interacting with any node on the network, and multisignature accounts with blockchain-based alerts. We also have progressive fees and wallet files instead of pass phrases. When a person really takes a look at NEM and NXT, they can see that they are both written in Java, but after that the differences start to really stand out.

CT: How many NEM coins were released, how were they distributed, and who are the stakeholders?

M: At launch 8,999,999,999 XEM were created (XEM is the currency of the NEM ecosystem) and distributed to almost 1,500 people. Some XEM were set aside for rewarding future development, building a mobile wallet for iOS and Android, giving rewards to people running nodes, creating a community fund run as a Decentralized Autonomous Organization (DAO), making a marketing fund where the community can propose ideas, starting a silver coin project where founding members of NEM will be given a limited edition 1 oz 999 silver NEM coin, and building a NEMSELF fund that will be used to help create a sustainable loop where XEM isn’t just constantly traded back and forth for fiat, but is instead passed from person to person for goods and services on its own.

These extra funds will not be used for bonuses for developers and important members in NEM, but are instead set aside in certain funds controlled with multisignature accounts and will only have the XEM released when these projects move forward.

CT: With the software now launched. How do you feel about it? Has there been any issue with it so far?

M: It's really quite unbelievable to have NEM launched after more than a year of work. It has been constant work for the entire team and this project has really dominated our lives. We have had an open test network since June 25th of last year, so by now our software is very stable and mature.

“[W]e want to work with governments, corporations, communities, and individuals to transform economies to be more efficient and help people to lead more productive lives.”

CT: What are your future plans with NEM? How is it going to be a new economy movement?

M: NEM is much more than just a technical solution or a cryptocurrency. We are a movement made up of thousands of individuals and we want to work together to empower individuals across the world. Towards this end, we want to work with governments, corporations, communities, and individuals to transform economies to be more efficient and help people to lead more productive lives.

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